LEASE AGREEMENT
Between
INPUT/OUTPUT, INC.
AND
GEOKINETICS INC.
Dated October 1, 1999
TABLE OF CONTENTS
PAGE
SECTION 1. DEFINITIONS.................................................1
SECTION 2. LEASE.......................................................1
SECTION 3. CERTAIN COSTS...............................................1
SECTION 4. REPRESENTATIONS AND WARRANTIES..............................1
SECTION 5. FINANCIAL AND OTHER REPORTS OF LESSEE.......................3
SECTION 6. TERM AND RENT...............................................4
Section 6.1. Lease Term.............................................4
Section 6.2. Basic Rent.............................................4
Section 6.3. Supplemental Rent......................................4
Section 6.4. Manner of Payments.....................................4
Section 6.5. Sales Tax..............................................5
SECTION 7. OWNERSHIP AND MARKING OF EQUIPMENT; PERSONAL PROPERTY.......5
Section 7.1. Retention of Title.....................................5
Section 7.2. Insignia...............................................5
Section 7.3. Personal Property......................................5
SECTION 8. DISCLAIMER OF WARRANTIES....................................5
SECTION 9. RETURN OF EQUIPMENT.........................................6
Section 9.1. Return of Equipment....................................6
Section 9.2. Condition of Units.....................................7
SECTION 10. LIENS.......................................................8
SECTION 11. MAINTENANCE AND OPERATION; COMPLIANCE WITH LAWS; SUBLEASES..8
Section 11.1. Maintenance and Operation.............................8
Section 11.2. Compliance with Laws, etc.............................8
Section 11.3. Sublease..............................................9
SECTION 12. MODIFICATIONS AND REPLACEMENTS..............................9
Section 12.1. Required Modifications................................9
Section 12.2. Optional Modifications................................9
Section 12.3. Removal of Property, Replacements....................10
SECTION 13. LOSS, DESTRUCTION OR REQUISITION...........................10
Section 13.1. Event of Loss........................................10
Section 13.2. Replacement upon Event of Loss.......................10
Section 13.3. Replacement of Unit..................................10
Section 13.4. Eminent Domain.......................................11
SECTION 14. INSURANCE..................................................11
Section 14.1. Insurance Coverage...................................11
Section 14.2. Certificates and Policies............................11
Section 14.3. Additional Insurance.................................12
SECTION 15. INSPECTION.................................................12
SECTION 16. LEASE EVENTS OF DEFAULT....................................12
SECTION 17. REMEDIES AND CERTAIN COVENANTS.............................13
Section 17.1. Remedies..............................................13
Section 17.2. Cumulative Remedies...................................15
Section 17.3. No Waiver.............................................16
Section 17.4. Notice of Lease Default...............................16
Section 17.5. Lessee's Duty to Return Equipment Upon Default........16
Section 17.6. Specific Performance; Lessor Appointed Lessee's Agent.16
SECTION 18. LESSEE'S INDEMNITIES.......................................16
Section 18.1. Taxes................................................16
Section 18.2. General Indemnification and Waiver of Certain Claims.17
SECTION 19. FURTHER ASSURANCES.........................................20
SECTION 20. LESSOR'S RIGHT TO PERFORM..................................20
SECTION 21. ASSIGNMENT.................................................20
Section 21.1. Assignment by Lessor.................................20
Section 21.2. Assignment by Lessee.................................21
Section 21.3. Sublessee's Performance and Rights...................21
SECTION 22. NET LEASE, ETC.............................................21
SECTION 23. NOTICES....................................................22
SECTION 24. PURCHASE OPTIONS...........................................23
Section 24.1. Election to Retain or Return Equipment at End of
Basic or Term........................................23
Section 24.2. Purchase Option......................................23
SECTION 25. MISCELLANEOUS..............................................23
Section 25.1. Merger Covenant......................................23
Section 25.2. No Impairment of Warranties..........................24
Section 25.3. Governing Law, Severability..........................24
Section 25.4. Execution in Counterparts............................24
Section 25.5. Headings and Table of Contents, Section References...24
Section 25.6. Successors and Assigns...............................24
Section 25.7. True Lease...........................................25
Section 25.8. Amendments and Waivers...............................25
Section 25.9. Survival.............................................25
Section 25.10. Business Days........................................25
Section 25.11. UCC Original.........................................25
Section 25.12. Waiver of Trial by Jury..............................26
Section 25.13. Waivers..............................................26
Attachments to Lease Agreement
Appendix A - Definitions
Schedules:
2 - Equipment
14.1 - Insurance
Exhibits:
A - Certificate of Acceptance
B - Acknowledgment Agreement
LEASE AGREEMENT
THIS LEASE AGREEMENT, is hereby entered into and dated October 1, 1999
(this "LEASE"), between INPUT/OUTPUT, INC., a Delaware corporation ("LESSOR"),
and GEOKINETICS INC., a Delaware corporation ("LESSEE").
RECITALS
SECTION 1. DEFINITIONS.
Unless the context otherwise requires, all capitalized terms used
herein without definition shall have the respective meanings set forth in
Appendix A hereto for all purposes of this Lease. All references in this Lease
to Sections, Exhibits and Schedules shall refer to Sections of or Exhibits or
Schedules attached to this Lease (as applicable) unless the context expressly
provides otherwise.
SECTION 2. LEASE.
This Lease provides the terms and conditions upon which Lessor will
lease to Lessee the Units of Equipment listed in Schedule 2, this Lease to be
effective not before Lessee's compliance with the terms and conditions of the
Restructure Agreement of this same date entered into herewith.
SECTION 3. CERTAIN COSTS.
Lessee agrees to pay when due the reasonable expenses (including
reasonable legal fees and expenses) of the Lessor incurred subsequent to the
Closing Date in connection with any supplements, amendments, modifications,
alterations, waivers or consents of or with respect to this Lease that are
requested by, or necessitated by action or inaction on the part of, Lessee or by
any applicable law or regulation (other than laws or regulations solely relating
to the business of Lessor) or entered into in connection with, or as a result
of, a Lease Default or Lease Event of Default.
SECTION 4. REPRESENTATIONS AND WARRANTIES.
Lessee represents and warrants to Lessor that:
(a) it is a corporation duly organized, validly existing and in
good standing under the laws of the state of its incorporation, is duly licensed
or qualified and in good standing in each jurisdiction in which the failure to
so qualify would have a material adverse effect on its ability to carry on its
business as now conducted or to enter into and perform its obligations under
this Lease, has the corporate power and authority to carry on its business as
then conducted and has the requisite power and authority to execute, deliver and
perform its obligations under this Lease.
(b) this Lease has been duly authorized by all necessary corporate
action of Lessee (no stockholder approval being required), and have been duly
executed and delivered by Lessee and, assuming the due authorization, execution
and delivery by the other parties thereto, constitute the legal, valid and
binding obligations of Lessee, enforceable against Lessee in accordance with
their
respective terms except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the rights of
creditors generally and by general principles of equity.
(c) the execution, delivery and performance by Lessee of this
Lease and each Lease Schedule, and compliance by Lessee with all of the
provisions thereof, do not contravene any law or regulation, or any order of any
court or Governmental Authority applicable to or binding on Lessee or any of its
properties, or contravene the provisions of, or constitute a default by Lessee
under, or result in the creation of any Lien upon the property of Lessee under
its certificate of incorporation, by-laws or other organizational documents or
any indenture, mortgage, contract or other agreement or instrument to which
Lessee is a party or by which Lessee or any of its property is bound or
affected.
(d) there are no proceedings pending or, to the knowledge of
Lessee, threatened against Lessee or any Subsidiary of Lessee in any court or
before any Governmental Authority or arbitration board or tribunal that
individually or in the aggregate could reasonably be expected to materially and
adversely affect the financial condition or business of Lessee and its
Subsidiaries, taken as a whole, or impair the ability of Lessee to perform its
obligations under this Lease or any lease Schedule, or that question the
validity of this Lease or any Lease Schedule or any action taken or to be taken
pursuant thereto. Neither Lessee nor any Subsidiary thereof is in default with
respect to any order of any court or Governmental Authority or arbitration board
or tribunal, the default under which would affect adversely the ability of
Lessee to perform its obligations under this Lease and each Lease Schedule.
(e) no consent, approval or authorization of, or filing,
registration or qualification with, or the giving of notice to, any trustee or
any holder of indebtedness of Lessee or any Governmental Authority is required
in connection with the execution and delivery by Lessee of this Lease and each
Lease Schedule.
(f) no Tax Liens have been filed and no claims are being asserted
with respect to any material Taxes, fees or other charges that could reasonably
be expected to have a materially adverse effect on its ability to perform its
obligations under this Lease or any Lease Schedule.
(g) no Lease Default or Lease Event of Default has occurred and is
continuing and to the knowledge of Lessee, no Event of Loss, or event with which
the giving of notice and/or the passage of time would constitute an Event of
Loss, has occurred.
(h) Lessee is not an "INVESTMENT COMPANY" or an "AFFILIATED
PERSON" of an "INVESTMENT COMPANY" within the meaning of the Investment Company
Act of 1940.
(i) none of the transactions contemplated by the Operative
Agreements will result in a violation of Section 7 of the Securities Exchange
Act of 1934, as amended, or any regulations issued pursuant thereto, including,
without limitation, Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System, 12 C.F.R., Chapter II.
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(j) Lessee is not in violation of any term of any charter
instrument, by-law or in any material respect of any other material agreement or
instrument to which it is a party or by which it may be bound. Lessee is in
compliance with all laws, ordinances, governmental rules and regulations to
which it is subject, the failure to comply with which would have a material and
adverse effect on its operations or condition, financial or otherwise, or would
impair its ability to perform its obligations under this Lease or any Lease
Schedule, and has obtained all licenses, permits, franchises and other
governmental authorizations material to the conduct of its business.
(k) no broker's or finder's or placement fee or commission will be
payable with respect to the transactions contemplated by this Lease or any Lease
Schedule as a result of any action by Lessee, and Lessee agrees that it will
hold Lessor harmless from any claim, demand or liability for any other broker's
or finder's or placement fees or commission alleged to have been incurred as a
result of any action by Lessee in connection with such transactions.
(l) Lessee is not subject to regulation as a "HOLDING COMPANY", an
"AFFILIATE" of a "HOLDING COMPANY", or a "SUBSIDIARY COMPANY" of a "HOLDING
COMPANY," within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
SECTION 5. FINANCIAL AND OTHER REPORTS OF LESSEE.
Lessee agrees that it will furnish or cause to be furnished directly to
the Lessor each of the following:
(a) unless included in a Form 10-Q SB delivered pursuant to
Section 5(c) within the 60-day period specified in this clause (a), as soon as
available and in any event within 60 days after the end of each quarterly
period, except the last, of each fiscal year, the consolidated balance sheet of
Lessee and its consolidated Subsidiaries as at the end of such period, together
with the related consolidated statements of income and cash flows of Lessee and
its consolidated Subsidiaries for the period beginning on the first day of such
fiscal year and ending on the last day of such quarterly period, setting forth
in each case (except for the consolidated balance sheet) in comparative form the
figures for the corresponding periods of the previous fiscal year, all in
reasonable detail and prepared in accordance with generally accepted accounting
principles, except that such statements may be without footnotes and subject to
year end revision;
(b) unless included in a Form 10-K SB delivered under Section 5(c)
within the 120-day period specified in this clause (b), as soon as available and
in any event within 120 days after the last day of each fiscal year, a copy of
Lessee's audited financial statements covering the operations of Lessee and its
consolidated Subsidiaries, including a consolidated balance sheet, and related
consolidated statements of income and cash flows of Lessee and its consolidated
Subsidiaries for such fiscal year, setting forth in each case in comparative
form the figures for the previous fiscal year, all in reasonable detail and
prepared in accordance with generally accepted accounting principles applied on
a consistent basis, which statements will have been certified by a firm of
independent certified public accountants selected by Lessee;
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(c) as soon as available, one copy of each Annual Report on Form
10-K SB (or any successor form) and Quarterly Report on Form 10-Q SB (or any
successor form) filed by Lessee with the Securities and Exchange Commission or
any successor agency;
(d) within the time period prescribed in Section 5(b), a
certificate, signed by the treasurer or principal financial officer of Lessee,
to the effect that the signer has reviewed the activities of Lessee during the
immediately preceding fiscal year and that the signer is not aware of any
default in compliance by Lessee with any of the covenants, terms and provisions
of any this Lease (except as specified), and if a default shall exist,
specifying such default and the nature and status thereof; and
(e) promptly, all material reports or statements that Lessee may
make to, or file with, the Securities and Exchange Commission or any successor
thereto (excluding such reports or statements that are treated as confidential
and not available to the public, in accordance with applicable law, by the
Securities and Exchange Commission, for so long as such confidentiality shall be
maintained).
SECTION 6. TERM AND RENT.
SECTION 6.1. LEASE TERM. The Basic Term of the Lease and the Units
covered thereby (the "BASIC TERM") shall commence as of the Basic Term
Commencement Date set forth in the preamble paragraph on page one hereof, and
subject to earlier termination pursuant to other provisions of this Lease shall
expire at 11:59 P.M. (Texas time) on the Basic Term Expiration Date for such
Lease.
SECTION 6.2. BASIC RENT. Lessee hereby agrees to pay the Lessor
$130,000 per month for the first 12 months hereof and $260,000 per month
thereafter until the later of expiration of the Basic Term or return of all of
the Equipment to Lessor per Section 9 hereof. Each monthly payment is due on the
first day of each month. At closing, Lessee will pay the prorated rent for the
remainder of the calendar month of closing and will then prepay the first and
second calendar month's rent in full. In addition to, and by no way in
limitation of, any other liens granted to Lessor, Lessee hereby grants Lessor a
security interest in any advanced payments of rent to secure any and all
obligations due hereunder, including but not limited to, any sums owed to Lessor
resulting from any breach of Lessee's obligations hereunder.
SECTION 6.3. SUPPLEMENTAL RENT. Lessee also agrees to pay to Lessor, or
to whomsoever shall be entitled thereto, any and all Supplemental Rent, promptly
as the same shall become due and owing, or where no due date is specified,
promptly after demand by the Person entitled thereto. Lessee will also pay, as
Supplemental Rent, but without duplication on demand, to the extent permitted by
applicable law, an amount equal to interest at the Late Rate on any part of any
installment of Basic Rent not paid when due for any period for which the same
shall be overdue and on any payment of Supplemental Rent not paid when due or
ten days after demanded, as the case may be, for the period from such due date
or ten days after demand until the same shall be paid.
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SECTION 6.4. MANNER OF PAYMENTS. All Rent (other than Supplemental Rent
payable to Persons other than Lessor, which shall be payable to such other
Persons in accordance with written instructions furnished to Lessee by such
Persons) shall be paid by Lessee to Lessor at such address or account in the
United States as may be designated in writing by Lessor to Lessee from time to
time. All Rent shall be paid by Lessee in funds consisting of lawful currency of
the United States of America, which shall be immediately available to the
recipient not later than 12:00 noon (Houston, Texas time) on the date of such
payment.
SECTION 6.5. SALES TAX. Together with all payments of Rent, Lessee
shall remit to Lessor, in the manner set forth in Section 6.4 above, all sales
and other similar taxes applicable to any Rent payments hereunder pursuant to
the Texas Tax Code Section 151.051 and Section 151.052.
SECTION 7. OWNERSHIP AND MARKING OF EQUIPMENT; PERSONAL PROPERTY.
SECTION 7.1. RETENTION OF TITLE. Lessor shall and hereby does retain
full legal title to and beneficial ownership of the Units notwithstanding the
delivery to and possession and use of the Units by Lessee hereunder or any
sublessee under any sublease permitted hereby.
SECTION 7.2. INSIGNIA. At Lessor's request, Lessee shall cause labels,
plates or similar items to be attached to the Units reflecting Lessor as the
owner of the Units. Lessee may cause the Units to be lettered with the names or
initials or other insignia customarily used by Lessee or any permitted
sublessees or any of their respective Affiliates for convenience of
identification of the right of Lessee to use the Units hereunder or any
permitted sublessee to use the Units pursuant to a sublease permitted hereby;
provided, such lettering shall in no manner conflict with the labeling performed
pursuant to the preceding sentence.
SECTION 7.3. PERSONAL PROPERTY. Lessee covenants that each Unit shall
remain personal property regardless of whether it becomes affixed or attached to
or incorporated into real property or any improvement thereof. Lessee shall not
permit any Unit to become so related to any particular real estate or
improvement or to be installed in or affixed to other goods so as to become part
of such real property or improvement or (unless such goods are also Units
covered by the same Lease) an accession to such other goods. Lessee agrees to
execute all such agreements and other documents and to obtain the execution
thereof by such other persons as Lessor may request, in recordable form, by all
parties having an interest in any real property to which any Unit is related,
with respect to the identity of such Unit as personal property, and the
disclaimer of any interest in such Unit by such other persons. Lessee consents
to the recordation of all such agreements and documents.
SECTION 8. DISCLAIMER OF WARRANTIES.
Without waiving any claim Lessee may have against any seller, supplier,
manufacturer or any other Person other than Lessor or its Affiliates, LESSEE
ACKNOWLEDGES AND AGREES THAT (i) EACH UNIT IS OF A SIZE, DESIGN, CAPACITY AND
MANUFACTURE SELECTED BY AND ACCEPTABLE TO LESSEE, (ii) LESSEE IS SATISFIED THAT
EACH UNIT IS SUITABLE FOR ITS PURPOSES AND LESSEE HAS ACCEPTED EACH UNIT, (iii)
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LESSEE HAS INSPECTED THE UNITS PRIOR TO DELIVERY TO AND ACCEPTANCE BY LESSEE,
(iv) EACH UNIT IS LEASED HEREUNDER SUBJECT TO ALL APPLICABLE LAWS AND
GOVERNMENTAL REGULATIONS NOW IN EFFECT OR HEREAFTER ADOPTED, AND (v) LESSOR
LEASES AND LESSEE TAKES EACH UNIT "AS-IS", "WHERE-IS" AND "WITH ALL FAULTS", IN
WHATEVER CONDITION IT MAY BE, AND LESSEE ACKNOWLEDGES THAT LESSOR DOES NOT MAKE
NOR SHALL BE DEEMED TO HAVE MADE, AND LESSOR EXPRESSLY DISCLAIMS, ANY AND ALL
RIGHTS, CLAIMS, WARRANTIES OR REPRESENTATIONS, EITHER EXPRESS OR IMPLIED, AS TO
THE VALUE, CONDITION, FITNESS FOR ANY PARTICULAR PURPOSE, DESIGN, OPERATION,
MERCHANTABILITY THEREOF OR AS TO THE TITLE, OF THE UNITS, THE QUALITY OF THE
MATERIAL OR WORKMANSHIP THEREOF OR CONFORMITY THEREOF TO SPECIFICATIONS, FREEDOM
FROM PATENT, COPYRIGHT OR TRADEMARK INFRINGEMENT, THE ABSENCE OF ANY LATENT OR
OTHER DEFECT, WHETHER OR NOT DISCOVERABLE, OR AS TO THE ABSENCE OF ANY
OBLIGATIONS BASED ON STRICT LIABILITY IN TORT OR ANY OTHER EXPRESS OR IMPLIED
REPRESENTATION OR WARRANTY WHATSOEVER WITH RESPECT THERETO AND LESSOR EXPRESSLY
DISCLAIMS SELECTION OF THE UNITS; except that Lessor represents and warrants
that Lessor shall have received whatever title to the Units as was conveyed to
Lessor. Lessor hereby appoints and constitutes Lessee its agent and
attorney-in-fact during the Basic Term to assert and enforce, from time to time,
in the name and for the account of Lessor and Lessee, as their interests may
appear, but in all cases at the sole cost and expense of Lessee, whatever claims
and rights Lessor may have as owner of the Units against the manufacturers or
any prior owner thereof; provided, if at any time a Specified Event shall have
occurred and be continuing, at Lessor's option, such power of attorney shall
terminate, and Lessor may assert and enforce, at Lessee's sole cost and expense,
such claims and rights. Lessor shall have no responsibility or liability to
Lessee or any other Person with respect to any of the following: (i) any
liability, loss or damage caused or alleged to be caused directly or indirectly
by any Unit, or by any operation thereof, whether or not permitted by the terms
hereof, or by any inadequacy thereof or deficiency or defect therein or by any
other circumstances in connection therewith including but not limited to alleged
defects in the design or construction of any Unit; (ii) the use, operation or
performance of any Unit or any risks relating thereto; (iii) any interruption of
service, loss of business or anticipated profits or consequential damages; or
(iv) the delivery, operation, servicing, maintenance, repair, improvement or
replacement of any Unit. Lessee's delivery of a Lease Schedule shall be
conclusive evidence as between Lessee and Lessor that all Units described
therein are in all the foregoing respects satisfactory to Lessee.
SECTION 9. RETURN OF EQUIPMENT.
SECTION 9.1. RETURN OF EQUIPMENT. (a) If Lessee elects not to deliver
the notice contemplated by Section 24.1 of its irrevocable election of the
purchase option in Section 24.2, Lessee shall deliver to Lessor a notice of its
intention to return the Units upon the expiration of the Base Term, such notice
to be furnished not less than 90 days prior to the expiration of such Basic
Term. Upon the expiration of the lease created by the applicable Lease Schedule
or earlier termination of such lease(other than when such Unit is being replaced
or sold pursuant to the terms hereof) with respect
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to a Unit, Lessee, at its own risk and expense, will comply with the
dismantling, storage, return, transport and other obligations set forth in this
Section 9.1. Upon redelivery the Units shall be free and clear of all Liens
except for Lessor Liens. Concurrently with each delivery of a Unit to Lessor
hereunder, upon request of Lessor, Lessee will deliver to Lessor all records, if
any, in its possession relating to the repair and maintenance history of such
Unit, including, without limitation, all logs, schedules and computer data
relating to such history of the type maintained in the ordinary course of
business of Lessee with respect to Units owned or leased by Lessee.
(b) Upon expiration or such earlier termination of the Basic Term
with respect to such Unit and compliance with the terms hereof (including
Section 9.2), the obligation to pay Basic Rent and all other Rent for such Unit
(except for any Rent obligations which have otherwise accrued but not been paid
as of the date of the expiration of the Basic Term) shall terminate.
(c) Upon the return of any Unit, Lessee shall, at its own cost and
expense, have taken all necessary action to assure that such Unit shall be in
the condition required by this Section 9.1 and Section 9.2. If Lessor or its
agent shall inspect any Unit pursuant to this Section and shall reasonably
determine that such Unit is not in the condition required by this Section 9.1 or
Section 9.2, Lessee, at no cost to Lessor, shall within 90 days thereafter make
such repairs and perform such work as shall be necessary to place such Units in
the condition required by this Section 9.1 and Section 9.2 to Lessor's
reasonable satisfaction, failing which Lessor may make such repairs and perform
such work at Lessee's expense.
(d) As to each Unit to be returned by Lessee hereunder, at
Lessor's request Lessee shall: (i) detach such Unit from a facility or
improvements (if any) to which such Unit may be attached, (ii) disassemble such
Unit to the extent necessary to transport the Unit via truck or another mode of
transportation selected by Lessor, (iii) repair any damage to the Unit occurring
during such detachment or disassembly activities per subparagraph (c) above, and
(iv) cause the Unit to be shipped to Lessor's Stafford, Texas, facility and to
be insured for no less than its full replacement value during such transport
(with Lessor to be the named insured under such insurance).
(e) The obligations of Lessee pursuant to Section 9.1 and Section
9.2 shall be at the expense and risk of Lessee.
SECTION 9.2. CONDITION OF UNITS. Each Unit when returned to Lessor
shall be (except for additions, modifications and improvements which Lessee is
entitled or required to make in accordance with the terms of this Lease) in the
condition such Unit is required to be maintained pursuant to Section 11.1;
provided, each Unit when returned to Lessor pursuant to Section 9.1 shall in all
events:
(i) have attached or affixed thereto all parts to which Lessor has
title hereunder; provided, as to any such parts that are
required to be removed during the removal of such Unit, such
parts may not be reattached but shall be required to be boxed
or crated and kept with such Unit;
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(ii) be free and clear of all Liens except Lessor Liens; and
(iii) be free of any marks or insignia which infringe the
proprietary rights of third parties.
SECTION 10. LIENS.
Lessee will not directly or indirectly create, incur, assume, permit or
suffer to exist any Lien on or with respect to any Units or Lessee's leasehold
interest therein under this Lease, except Permitted Liens or Lessor Liens, and
Lessee shall promptly, at its own expense, take such action or cause such action
to be taken as may be necessary to duly discharge (by bonding or otherwise) any
such Lien not excepted above if the same shall arise at any time.
SECTION 11. MAINTENANCE AND OPERATION; COMPLIANCE WITH LAWS; SUBLEASES.
SECTION 11.1. MAINTENANCE AND OPERATION. Lessee shall pay or cause its
permitted sublessees to pay all costs, expenses, fees and charges incurred in
connection with the use and operation of each Unit. Lessee shall at all times,
at its or its sublessee's own expense, maintain or cause to be maintained the
Units or cause the Units to be maintained (i) in good operating and physical
condition, ordinary wear and tear excepted, and (ii) as shall be necessary to
maintain each Unit in compliance with Applicable Law. The foregoing undertaking
to maintain the Units shall apply regardless of the cause necessitating repair
(whether foreseen or unforeseen) and regardless of whether Lessee has possession
of the Units, and as between Lessor on the one hand, and Lessee, on the other
hand, all risk of damage to the Units is assumed by Lessee. Lessee will acquire
and maintain or cause to be maintained all Permits, records, logs and other
materials required by any Governmental Authority having jurisdiction over the
Units required to be maintained in respect of any Unit, all as if Lessee were
the owner of such Units, including without limitation all permits, records, logs
and other materials necessary to authorize construction, operation, repair and
modification of the Units. Lessor shall have no responsibility for the
maintenance and operation of the Units, and shall likewise have no
responsibility to obtain permits or to maintain records required by any
Governmental Authority for the acquisition, construction, operation, repair or
modification of any Unit.
SECTION 11.2. COMPLIANCE WITH LAWS, ETC. (a) So long as no Lease Event
of Default shall have occurred and be continuing, Lessee may use the Units in
the regular course of its business in any manner which is in compliance with
Applicable Law and is consistent with the purpose for which it was designed.
Lessee will not do or permit any act or thing which is contrary in any material
respect to any Applicable Law. Lessee shall cause to be obtained and maintained
all Permits of, and filings and registrations with, any Governmental Authority
or other Person necessary for the performance by Lessee of its obligations
hereunder or the acquisition, construction, modification, repair, use or
operation of the Units. Lessee shall also be responsible at its sole expense to
purchase or obtain any emission reduction credits, emission allowances or
offsets required under environmental law for the acquisition, construction,
modification, repair, use or operation of the Units.
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(b) Lessee shall, at its own sole cost and expense, promptly and
duly execute, deliver, file and record all such documents, statements, filings
and registrations, and take such further actions as Lessor shall from time to
time reasonably request in a manner consistent with commercial practices at the
time in order to preserve and maintain Lessor's title to and interest in the
Units in any applicable jurisdiction.
(c) Lessee shall use reasonable precautions to prevent loss or
damage to the Units and to prevent injury to third persons, in a manner
consistent with Lessee's customary practices with respect to its own property
similar to the Units. Lessee shall cooperate fully with the reasonable requests
of Lessor in the investigation and defense of any claims or suits arising from
the operation of the Units; provided, nothing contained in this paragraph (c)
shall be construed as imposing on Lessor any duty to investigate or defend any
such claims or suits or as a waiver of any of Lessee's rights and obligations
with respect thereto.
(d) Lessee shall keep according to its customary practice accurate
and current records with respect to the Units. To the extent Lessee now or
hereafter maintains records with respect to state of repair with respect to any
class of equipment or property included within the Units, Lessee shall also do
so with respect to the Units.
(e) Lessee shall not suffer to exist any judgment, decree or order
of any court or other Governmental Authority (i) which has or is reasonably
likely to have an adverse effect on any Unit or (ii) which is reasonably likely
to interfere with the due and timely payment by Lessee of any sum payable or the
exercise of any of its rights or the performance of any of its duties or
responsibilities (including without limitation under this Section) under this
Lease unless such judgment, decree or order is the subject of a Permitted
Contest. Lessee shall, on receipt of notice from Lessor to the effect that any
such judgment, decree or order exists, promptly take such action as may be
reasonably necessary to prevent or terminate such judgment, decree or order.
SECTION 11.3. SUBLEASE. (a) Lessee shall not sublease the Units without
the prior written consent of Lessor, which consent Lessor may grant or withhold
in its discretion; provided, no consent of Lessor shall be required with respect
to a sublease to an Affiliate of Lessee. No sublease shall relieve Lessee from
any of its obligations hereunder.
(b) So long as no Lease Event of Default has occurred and is
continuing, Lessor will not take or authorize others to take any action contrary
to the terms of any permitted sublease to deprive the sublessee thereunder of
the right to peaceful, quiet and uninterrupted use and enjoyment of the Units so
subleased without any interference, hindrance, ejection or molestation by or
from Lessor.
SECTION 12. MODIFICATIONS AND REPLACEMENTS.
SECTION 12.1. REQUIRED MODIFICATIONS. If any Applicable Law requires
that any Unit be altered or modified (a "REQUIRED MODIFICATION"), Lessee agrees
that it shall, at no cost to Lessor, cause such Required Modification to be made
unless such requirement is then the subject of a Permitted Contest by Lessee.
Title to any Required Modification shall immediately vest in Lessor.
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SECTION 12.2. OPTIONAL MODIFICATIONS. Lessee at anytime may in its
discretion and at its own cost and expense modify, alter or improve any Unit in
a manner which is not required by Section 12.1 (a "MODIFICATION"); provided, no
Modification shall diminish the current value and estimated residual value,
utility or remaining useful life of such Unit below the current value and
estimated residual value, utility or remaining useful life thereof immediately
prior to such Modification, other than in a DE MINIMIS manner, assuming such
Unit was then in the condition required to be maintained by the terms of this
Lease. Title to any Non-Severable Modification shall be immediately vested in
Lessor. Title to any Severable Modification shall remain with Lessee unless it
is a Required Modification, in which case title shall vest in Lessor pursuant to
Section 12.1. Title to any Severable Modification on any Unit not removed by
Lessee shall pass to Lessor upon return of such Unit to Lessor.
SECTION 12.3. REMOVAL OF PROPERTY, REPLACEMENTS. Lessee may, in the
ordinary course of maintenance or repair of any Unit, remove any item of
property constituting a part of such Unit, and, unless the removal of such item
is required by Section 12.1, Lessee shall replace such item as promptly as
practicable with an item of property that is free and clear of all Liens (other
than Lessor Liens) and in as good operating condition as, and with a current
value and estimated residual value, utility and useful life at least equal to,
the current value, estimated residual value, utility and useful life as the item
of property being replaced, assuming that such replaced item was in the
condition required to be maintained by the terms of this Lease. Any item of
property removed from such Unit as provided in the preceding sentence shall
remain the property of Lessor free and clear of all rights of Lessee until
replaced in accordance with the terms of such sentence, but shall then, without
further act, become the property of Lessee. Any such replacement property shall,
without further act, become the property of Lessor and be deemed part of such
Unit for all purposes.
SECTION 13. LOSS, DESTRUCTION OR REQUISITION.
SECTION 13.1. EVENT OF LOSS. If any Unit shall (a) suffer damage or
contamination which, in Lessee's reasonable judgment, makes repair or
modification uneconomic for commercial use, (b) suffer destruction, or shall
suffer theft or, for a period exceeding three months, or if earlier, the
expiration of the Lease, disappearance, (c) have title thereto taken or
appropriated by any Governmental Authority under the power of eminent domain or
otherwise, (d) suffer an actual or constructive total loss, (e) in the normal
course of commerce, have been prohibited from being used for a continuous period
in excess of three months or if earlier, the expiration of this Lease as a
result of any rule, regulation, order promulgated, or any other action taken, by
any United States Governmental Authority, or (f) be taken or requisitioned for
use by any United States Governmental Authority under the power of eminent
domain or otherwise, and such taking or requisition is for a period that exceeds
12 months or if earlier, the expiration of the Basic Term or Renewal Term, as
applicable (any such occurrence being hereinafter called an "EVENT OF LOSS"),
Lessee, in accordance with the terms of Section 13.2, shall fully inform Lessor
of such Event of Loss.
SECTION 13.2. REPLACEMENT UPON EVENT OF LOSS. On the Rent Payment Date
immediately following the occurrence of an Event of Loss, Lessee shall convey or
cause to be conveyed to Lessor a Replacement Unit to be leased to Lessee
hereunder in place of the Unit, such Replacement
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Unit to be an identical Unit and free and clear of all Liens (other than
Permitted Liens and Lessor Liens), and all terms of this Lease will apply to the
Replacement Unit as would apply to the Unit had it not been replaced.
SECTION 13.3. REPLACEMENT OF UNIT. For all purposes hereof, upon
passage of title thereto to Lessor, each Replacement Unit shall be deemed part
of the property pursuant to this Lease, and such Replacement Unit shall be
deemed a "UNIT" of Equipment as defined herein. Upon such passage of title,
Lessor will transfer to Lessee, without recourse or warranty (except as to
Lessor Liens), all of Lessor's right, title and interest in and to the replaced
Unit (and shall execute and deliver to Lessee or its designee such bills of sale
and other documents and instruments as Lessee may reasonably request to evidence
such conveyance). Lessee shall pay or cause to be paid all reasonable out-of-
pocket costs and expenses (including reasonable legal fees and expenses)
incurred by Lessor in connection with any replacement pursuant to this Section
13.3.
SECTION 13.4. EMINENT DOMAIN. If during the Basic Term the use of any
Unit is requisitioned or taken by any Governmental Authority under the power of
eminent domain or otherwise for a period which does not constitute an Event of
Loss, all of Lessee's obligations under the Operative Agreements, including
without limitation, Lessee's obligation to pay all installments of Basic Rent,
shall continue for the duration of such requisitioning or taking. Lessee shall
be entitled to receive and retain for its own account all sums payable for any
such period by such Governmental Authority as compensation for the
requisitioning or taking of possession.
SECTION 14. INSURANCE.
SECTION 14.1. INSURANCE COVERAGE. At all times until the Units are
returned to Lessor in accordance with the terms of this Lease, Lessee shall
maintain, at no cost to Lessor, the insurance described on Schedule 14.1.
SECTION 14.2. CERTIFICATES AND POLICIES.
(a) CERTIFICATE OF INSURANCE. Lessee shall, prior to the Closing
Date, furnish Lessor with a certificate signed by the insurer or an independent
insurance broker showing the insurance then maintained by Lessee pursuant to
Section 14.1 and that all premiums thereon have been timely paid and any
financing thereof is current, or other evidence of maintenance of the insurance
required hereunder satisfactory to Lessor and, with respect to any renewal
policy or policies, shall furnish certificates or binders evidencing such
renewal as soon as practicable (and in any event no later than ten days prior to
the stated expiration date of the policies then in effect). Such certificate
shall designate Lessee as the insured entity and Lessor as an additional insured
entity and as a payee for any insurable loss.
(b) POLICY PROVISIONS. All insurance policies required to be
maintained pursuant to Section 14.1 shall (and Lessee shall so request of
each insurer) (i) provide that the interests of Lessor shall not be
invalidated by any action or inaction by Lessee or any other Person (other
than Lessor), (ii) insure Lessor regardless of any breach or violation by
Lessee or any other Person (other
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than Lessor) of any warranties, declarations or conditions in such polices,
(iii) provide that Lessor will be furnished with at least 30 days prior
written notice of any cancellation prior to expiration of coverage, (iv)
provide that such insurance is primary without any right of contribution form
any other insurance carried by Lessor or any of its Affiliates and shall
expressly provide that all provisions, except the limits of liability, shall
operate in the same manner as if there were a separate policy covering each
such additional insured, (v) provide that the insurers waive any rights of
setoff, recoupment, counterclaim, deduction, or subrogation against Lessor,
and (vi) acknowledge that any obligation imposed on Lessee (including,
without limitation, the liability to pay premiums, calls, commissions or
assessments) shall be the sole obligation of Lessee and not the obligation of
Lessor.
SECTION 14.3. ADDITIONAL INSURANCE. If Lessee shall fail to cause to be
maintained the insurance as provided in Section 14.1(a), Lessor may at its
option, upon ten days' prior written notice to Lessee, acquire such insurance
and, in such event, Lessee shall, upon demand from time to time, reimburse
Lessor for the cost thereof together with interest from the date of payment
thereof, on the amount of the cost to Lessor of such insurance which Lessee
shall have failed to maintain, at the applicable Late Rate. In addition, at any
time Lessor may at its own expense carry insurance with respect to its interest
in the Units. Any insurance payments received from policies maintained by Lessor
pursuant to the preceding sentence shall be retained by Lessor without reducing
or otherwise affecting Lessee's obligations hereunder.
SECTION 15. INSPECTION.
Lessor shall have the right, but not the obligation, at its sole cost
and expense, by its authorized representatives, to inspect any Units and
Lessee's maintenance records with respect to the Units. No inspection pursuant
to this Section 15 shall interfere with the use, operation or maintenance of the
Units or the normal conduct of Lessee's business.
SECTION 16. LEASE EVENTS OF DEFAULT.
The following events shall constitute Lease Events of Default hereunder
(whether any such event shall be voluntary or involuntary or come about or be
effected by operation of law or pursuant to or in compliance with any judgment,
decree or order of any court or any order, rule or regulation of any
Governmental Authority) and each such Lease Event of Default shall be deemed to
exist and continue so long as, but only as long as, it shall not have been
remedied:
(a) Lessee shall fail to make any payment of Basic Rent to be paid
by Lessee for any Units pursuant to this Lease within five days after the same
shall have become due; or
(b) Lessee shall fail to make any payment of any Supplemental Rent
(excluding Supplemental Rent covered by clause (a) preceding) to be paid by
Lessee pursuant to this Lease after the same shall have become due and such
failure shall continue unremedied for ten days after receipt by Lessee of the
original demand therefor from Lessor; or
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(c) any representation or warranty made by Lessee in this Lease is
untrue or incorrect in any material respect as of the date of making thereof and
such untruth or incorrectness shall be material and unremedied for a period of
30 days after receipt by Lessee of written notice thereof from Lessor; or
(d) Lessee shall (i) commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law now or hereafter
in effect, or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, or (ii) consent to any such relief or to the appointment of or taking
possession by any such official in any voluntary case or other proceeding
commenced against it, or (iii) admit in writing its inability to pay its debts
generally as they come due, or (iv) make a general assignment for the benefit of
creditors; or
(e) an involuntary case or other proceeding shall be commenced
against Lessee seeking liquidation, reorganization or other relief with respect
to it or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect, or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 60 days; or
(f) Lessee shall fail to observe or perform in any material
respect any other covenants or agreements to be observed or performed by Lessee
under this Lease and such failure shall continue unremedied for 30 days after
notice from Lessor to Lessee, specifying the failure and demanding the same to
be remedied; or
(g) Lessee has failed, after the expiration of any applicable
notice or cure period or both, to make one or more payments due or has otherwise
defaulted on any indebtedness for borrowed money, which failure or default
relates to a payment (or a sum of payments); in excess of $500,000; or
(h) A Change of Control of Lessee occurs; or
(i) Lessee sells or disposes of all, or substantially all, of its
assets; or
(j) Lessee makes any dividend payment to any common stockholder or
repurchases or redeems any equity.
SECTION 17. REMEDIES AND CERTAIN COVENANTS.
SECTION 17.1. REMEDIES. Upon the occurrence of any Lease Event of
Default and at any time thereafter so long as the same shall be continuing, any
Lessor may, at its option, declare this Lease and each other Lease entered into
pursuant to this Lease to be in default by a written notice to Lessee (except
that this Lease and such other Leases shall, without any action on the part of
Lessor,
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be automatically deemed to have been declared in default upon the occurrence of
a Lease Event of Default described in Section 16(d) or (e)); and at any time
thereafter, unless Lessee shall have remedied all outstanding Lease Events of
Default prior to the commencement of the exercise by Lessor of any of its
remedies hereunder, Lessor may do one or more of the following as Lessor in its
sole discretion shall elect, to the extent permitted by, and subject to
compliance with any mandatory requirements of, applicable law then in effect:
(a) proceed by appropriate court action or actions, either at law
or in equity, to enforce performance by Lessee of the applicable covenants of
this Lease or to recover damages for the breach thereof;
(b) by notice in writing to Lessee, cancel this Lease, whereupon
all rights of Lessee and any sublessee to the possession and use of the Units
shall absolutely cease and terminate as though this Lease and such sublease had
never been made, but Lessee shall remain liable as hereinafter provided; and
thereupon, Lessor may demand that Lessee, and Lessee shall, upon written demand
of Lessor and at no cost to Lessor, forthwith return physical possession of
and/or all of Lessee's rights to control all or any part of the Units in the
manner and condition required by, and otherwise in accordance with all of the
provisions in Section 9; or Lessor with or without notice or judicial process
may by its agents enter upon the premises where any of the Units at the time may
be located and take possession of and remove all or any of the Units, and Lessor
may use and employ in connection with such removal any services, aids,
equipment, trackage and other facilities as is reasonably required to remove
such Units and thenceforth hold, possess and enjoy the same free from any right
of Lessee to use such Units for any purpose whatever;
(c) sell any Unit at public or private sale by such advertisement
or publication, if any, as Lessor may determine, free and clear of any rights of
Lessee and without any duty to account to Lessee with respect to such sale or
for the proceeds thereof;
(d) hold, keep idle or lease to others any Unit as Lessor in its
sole discretion may determine, free and clear of any rights of Lessee;
(e) whether or not Lessor shall have exercised, or shall
thereafter at any time exercise, any of its rights under clause (a), (b), (c) or
(d) above with respect to any Unit, Lessor, by written notice to Lessee
specifying a payment date, which shall be not earlier than ten days after the
date of such notice, may demand that Lessee pay to Lessor, and Lessee shall pay
or cause to be paid to Lessor, on the payment date specified in such notice, as
liquidated damages for loss of a bargain and not as a penalty (in lieu of the
Basic Rent for such Unit attributable to the period after the payment date
specified in such notice), all Rent due and payable, or accrued, for such Unit
as of the payment date specified in such notice plus whichever of the following
amounts Lessor, in its sole discretion, shall specify in such notice: (i) an
amount with respect to each such Unit which represents the excess of the present
value, at the time of such payment date, of all rentals for such Unit which
would otherwise have accrued hereunder from such payment date for the remainder
of the Basic Term over the then present value of the then Fair Market Rental
Value of such Unit (taking into
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account its actual condition) for such period, such present value to be computed
in each case on a basis of a per annum discount at 12%, compounded on the same
periodic basis that Basic Rent is due under this Lease from the respective dates
upon which rentals would have been payable hereunder had this Lease not been
terminated; or (ii) if Lessor shall not have sold such Unit pursuant to the
exercise of its rights under clause (c) above with respect to such Unit, an
amount equal to the present value, at the time of such payment date, of all
rentals for such Unit which would otherwise have accrued hereunder from such
payment date for the remainder of the Basic Term, such present value to be
computed on a basis of a per annum discount at 12%, compounded on the same
periodic basis that Basic Rent is due under this Lease from the respective dates
upon which rentals would have been payable hereunder had this Lease not been
terminated, plus the Fair Market Sales Value of such Unit (assuming it is in the
condition required by this Lease) as of the payment date specified in such
notice, and upon payment by Lessee pursuant to this clause (ii) and of all other
amounts payable by Lessee under this Lease and under this Lease in respect of
such Unit, Lessor shall transfer "as-is," "where-is," "with all faults," without
recourse or warranty except as to the absence of any Lessor Lien, all right,
title and interest of Lessor in and to such Unit to Lessee or its designee, and
Lessor shall execute and deliver such instruments or documents evidencing such
transfer, including a xxxx of sale, as Lessee shall reasonably request, and the
obligation of Lessee to pay Basic Rent for such Unit under the Lease shall cease
and the Basic Term for such Unit shall end.
(f) if Lessor shall have sold any Unit pursuant to paragraph (c)
above, Lessor, in lieu of exercising its rights under paragraph (e) above with
respect to such Unit may, if it shall so elect, demand that Lessee pay to
Lessor, and Lessee shall pay to Lessor, as liquidated damages for loss of a
bargain and not as a penalty, any accrued and unpaid Rent for such Unit as of
the date of such sale and, if that date is a Rent Payment Date, the Basic Rent
due on that date, plus, the amount, if any, by which the sum of (i) all rentals
for such Unit which would otherwise have accrued hereunder, and (ii) the Fair
Market Sales Value of such Unit (assuming it is in the condition required by
this Lease), both computed as of the Rent Payment Date next preceding the date
of such sale or, if such sale occurs on a Rent Payment Date, then computed as of
such Rent Payment Date, exceeds the Net Proceeds of such sale; and
(g) Lessor may terminate the leasing of any or all Units under
this Lease or may exercise any other right or remedy that may be available to it
under applicable law.
In addition, Lessee shall be liable, except as otherwise provided
above, for any and all unpaid Rent attributable to the period before the
exercise of any of the foregoing remedies, and for legal fees and other costs
and expenses incurred by reason of the occurrence of any Lease Event of Default
or the exercise of Lessor's remedies with respect thereto, including without
limitation the repayment in full of any costs and expenses necessary to be
expended in repairing any Unit in order to cause it to be in compliance with all
maintenance and regulatory standards imposed by this Lease.
SECTION 17.2. CUMULATIVE REMEDIES. The remedies expressly set forth in
this Lease in favor of Lessor shall not be deemed exclusive, but shall be
cumulative and shall be in addition to all other remedies in its favor existing
at law or in equity. Lessee hereby waives any mandatory requirements
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of law, now or hereafter in effect, which might limit or modify any of the
remedies herein provided, to the extent that such waiver is permitted by law.
Lessee hereby waives any and all existing or future claims of any right to
assert any offset or counterclaim against the Rent payments due hereunder, and
agrees to make the rent payments regardless of any offset or counterclaim or
claim which may be asserted by Lessee on its behalf in connection with the lease
of the Units. To the extent permitted by applicable law, Lessee hereby waives
any rights now or hereafter conferred by statute or otherwise that may require
Lessor to sell, lease or otherwise use the Units in mitigation of Lessor's
damages as set forth in Section 17.1 or that may otherwise limit or modify any
of Lessor's rights and remedies provided in this Section 17.2.
SECTION 17.3. NO WAIVER. No delay or omission to exercise any right,
power or remedy accruing to Lessor upon any breach or default occurring under
this Lease shall impair any such right, power or remedy of Lessor, nor shall any
such delay or omission be construed as a waiver of any breach or default, or of
any similar breach or default hereafter occurring; nor shall any waiver of a
single breach or default be deemed a waiver of any subsequent breach or default.
SECTION 17.4. NOTICE OF LEASE DEFAULT. Lessee agrees to furnish to
Lessor, promptly upon any Responsible Officer acquiring actual knowledge
thereof, written notice of any condition which constituted or constitutes a
Lease Default under this Lease, describing such condition and the nature and
status thereof.
SECTION 17.5. LESSEE'S DUTY TO RETURN EQUIPMENT UPON DEFAULT. If Lessor
shall terminate the leasing of any or all Units pursuant to this Section 17 and
shall have provided to Lessee the written demand specified in Section 17.1(b)
with respect to such Units, Lessee shall forthwith deliver possession of and
return such Units to Lessor in accordance with Section 9.1 (except where Lessor
has received all amounts payable by Lessee pursuant to any notice provided by
Lessor under Section 17.1(e)(iii)). All Units returned shall be in the condition
required by Sections 9.1 and 9.2.
SECTION 17.6. SPECIFIC PERFORMANCE; LESSOR APPOINTED LESSEE'S AGENT.
The obligations of Lessee pursuant to Section 17.5 to comply with the
requirements of Sections 9.1 and 9.2 are of the essence of this Lease and, upon
application to any court of equity having jurisdiction in the premises, Lessor
shall be entitled to a decree against Lessee requiring specific performance of
such obligations. Without in any way limiting the obligation of Lessee under the
provisions of Section 17.5, Lessee hereby irrevocably appoints Lessor as the
agent and attorney of Lessee, with full power and authority, at any time while
Lessee is obligated to deliver possession of any Units to Lessor pursuant to
this Section 17.6, to demand and take possession of such Unit in the name and on
behalf of Lessee from whosoever shall be at the time in possession of such Unit.
SECTION 18. LESSEE'S INDEMNITIES.
SECTION 18.1. TAXES.
(a) PAYMENT OF TAXES: Lessee covenants and agrees to pay to the
appropriate taxing authority other than as provided in Section 6.5, and
discharge before the same become delinquent, all taxes, fees, or other charges
of any nature whatsoever, without pro-ration, together with any related interest
or penalties ("Impositions") now or hereafter imposed, assessed or payable
during the term of the Lease including any extension thereof (including any
holdover) (or an Imposition relating to a record date or status date that fell
within the term of the Lease including any extension thereof or is otherwise
associated with Lessee's leasing, possession or use of the Equipment) against
Lessor, Lessee or the Equipment by any federal, state, county or local
government or taxing authority upon or with respect to (i) the Equipment or any
Unit, (ii) upon the leasing, ordering, purchase, sale, ownership, use,
operation, return or other disposition thereof, (iii) the Monthly Rental or any
other sums due hereunder, or (iv) the leasing of the Equipment, excepting only
federal, state and local taxes measured by the net income of Lessor or any
franchise tax upon Lessor measured by Lessor's capital, capital stock or net
worth. Because the payment due date or reimbursement date for an Imposition may
occur after the expiration or termination of the term of this Lease, it is
understood and agreed that Lessee's liability for such Impositions shall survive
the expiration or termination of the term of this Lease.
(b) BILLING: Lessee shall, to the extent permitted by law, cause
all Impositions to be billed to Lessee. Lessee shall, at its expense, timely
file all forms and returns and timely do all things required to be done in
connection with the levy, assessment and payment of any Impositions, and Lessor
hereby appoints Lessee as Lessor's attorney-in-fact where necessary for such
purposes. Lessee shall submit written evidence to Lessor of the payment of all
Impositions required to be paid by Lessee hereunder promptly after such payment.
Notwithstanding the foregoing, Lessor in its sole discretion, may pay any
Imposition itself or file any forms or returns with respect thereto. If Lessor
pays any Imposition, Lessee shall, when billed, reimburse Lessor for such
payment.
(c) CONTEST. Lessee may contest any Imposition by appropriate
legal proceedings, provided the nonpayment of such Imposition thereof, or such
proceedings, will not, in the opinion of counsel for Lessor, adversely affect
the title, property interest or rights of Lessor in the Equipment and provided
further that, if requested by Lessor, Lessee has given to Lessor security,
sufficient in form and amount in Lessor's reasonable judgment, to fully satisfy
the amount of the contested Imposition.
SECTION 18.2. GENERAL INDEMNIFICATION AND WAIVER OF CERTAIN CLAIMS.
(a) CLAIMS DEFINED. For the purposes of this Section 18.2,
"CLAIMS" shall mean any and all costs, expense, liabilities, obligations,
losses, damages, penalties, actions or suits or claims of whatsoever kind or
nature (whether or not on the basis of negligence, strict or absolute liability
or liability in tort) which may be imposed on, incurred by, suffered by, or
asserted against an Indemnified Person, as defined herein, or any Unit and,
except as otherwise expressly provided in this Section 18.2, shall include, but
not be limited to, all reasonable out-of-pocket costs, disbursements and
expenses (including legal fees and expenses) paid or incurred by an Indemnified
Person in connection therewith or related thereto. "Claims" shall include all
Claims brought by or
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on behalf of any Person, including but not limited to
officers, employees, agents, independent contractors, employees of independent
contractors, parents, subsidiaries and affiliates of Lessee.
(b) INDEMNIFIED PERSON DEFINED. For the purposes of this Section
18.2, "INDEMNIFIED PERSON" means Lessor and its directors, officers, employees,
successors and permitted assigns, agents and servants.
(c) CLAIMS INDEMNIFIED. Lessee agrees to indemnify, protect,
defend and hold harmless each Indemnified Person on an After-Tax Basis against
Claims directly or indirectly resulting from or arising out of or alleged to
result from or arise out of (whether or not such Indemnified Person shall be
indemnified as to such Claim by any other Person):
(i) this Lease or any of the transactions contemplated hereby
and thereby or any Unit or the ownership, lease, operation, possession,
modification, improvement, abandonment, use, non-use, maintenance,
sublease, substitution, control, repair, rebuild, refurbishment,
storage, alteration, transfer or other application or disposition,
return, overhaul, testing, servicing, replacement, permitting or
registration or any other Governmental Authorization of any Unit
(including, without limitation, injury, death or property damage of
passengers, shippers or others, and environmental control, noise and
pollution regulations, or the discharge, spillage, release or escape of
Hazardous Substances or damage to the environment (including, without
limitation, clean-up costs, response costs, costs of corrective actions
and natural resource damages) whether assessed by any Governmental
Authority or any other Person) whether or not in compliance with the
terms of this Lease, or by any of the commodities, items or materials
from time to time utilized in or processed through any Unit, whether or
not in compliance with the terms of this Lease, or by the inadequacy of
any Unit or deficiency or defect in any Unit or by any other
circumstances in connection with any Unit, or by the performance of any
Unit or any risks relating thereto, or by any interruption of service,
loss of business or anticipated profits or consequential damages;
(ii) the acquisition, construction, manufacture, financing,
refinancing, design, purchase, acceptance, rejection, delivery,
non-delivery or condition of any Unit (including, without limitation,
latent and other defects, whether or not discoverable, and any claim
for patent, trademark or copyright infringement);
(iii) any act or omission (whether negligent or otherwise) or
any breach of or failure to perform or observe, or any other
non-compliance with, any covenant, condition or agreement to be
performed by, or other obligation of, Lessee under any of the Operative
Agreements, or the falsity of any representation or warranty of Lessee
in any of the Operative Agreements or in any document or certificate
delivered in connection therewith; or
(iv) any violation of law, rule, regulation or order by Lessee
or any sublessee or their respective directors, officers, employees,
agents or servants.
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(d) INSURED CLAIMS. In the case of any Claim indemnified by Lessee
hereunder which is covered by a policy of insurance maintained by Lessee
pursuant to this Lease or otherwise, each Indemnified Person agrees to provide
reasonable cooperation to the insurers in the exercise of their rights to
investigate, defend or compromise such Claim as may be required to remain the
benefits of such insurance with respect to such Claim.
(e) CLAIMS PROCEDURE. An Indemnified Person shall, after obtaining
knowledge thereof, promptly notify Lessee of any Claim as to which
indemnification is sought; provided, the failure to give such notice shall not
release Lessee from any of its obligations under this Section 18.2, except to
the extent that failure to give notice of any action, suit or proceeding against
such Indemnified Person shall have a material adverse affect on Lessee's ability
to defend such Claim or recover proceeds under any insurance policies maintained
by Lessee hereunder. Lessee shall, after obtaining knowledge thereof, promptly
notify each Indemnified Person of any indemnified Claim affecting such Person.
Subject to the provisions of the following paragraph, Lessee shall at its sole
cost and expense be entitled to control, and shall assume full responsibility
for, the defense of such claim or liability; provided, Lessee shall keep the
Indemnified Person which is the subject of such proceeding fully apprised of the
status of such proceeding and shall provide such Indemnified Person with all
information with respect to such proceeding as such Indemnified Person shall
reasonably request. Upon the request of Lessee, the Indemnified Person which is
the subject of any Claim will cooperate in all reasonable respects, at no
expense to such Indemnified Person, in the defense thereof.
Notwithstanding any of the foregoing to the contrary, Lessee shall not
be entitled to control and assume responsibility for the defense of such claim
or liability if (i) a Lease Event of Default shall have occurred and be
continuing, (ii) such proceeding will involve any material danger of the sale,
forfeiture or loss of, or the creation of any Lien (other than any Lien which is
adequately bonded to the satisfaction of such Indemnified Person) on any Unit,
(iii) the amounts involved, in the good faith opinion of such Indemnified
Person, are likely to have a materially adverse effect on the business of such
Indemnified Person other than the ownership, leasing and financing of the Units,
(iv) in the good faith opinion of such Indemnified Person, there exists an
actual or potential conflict of interest such that it is advisable for such
Indemnified Person to retain control of such proceeding or (v) such claim or
liability involves the possibility of criminal sanctions or liability to such
Indemnified Person. In the circumstances described in clauses (i) - (v) above,
the Indemnified Person shall be entitled to control and assume responsibility
for the defense of such claim or liability at the expense of Lessee. In
addition, any Indemnified Person may participate in any proceeding controlled by
Lessee pursuant to this Section 18.2, at its own expense, in respect of any such
proceeding as to which Lessee shall have acknowledged in writing its obligation
to indemnify the Indemnified Person pursuant to this Section 18.2, and at the
expense of Lessee in respect of any such proceeding as to which Lessee shall not
have so acknowledged its obligation to the Indemnified Person pursuant to this
Section 18.2. Lessee may in any event participate in all such proceedings at its
own cost. Nothing contained in this Section 18.2 shall be deemed to require an
Indemnified Person to contest any Claim or to assume responsibility for or
control of any judicial proceeding with respect thereto.
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(f) SUBROGATION. If a Claim indemnified by Lessee under this
Section 18.2 is paid in full by Lessee and/or an insurer under a policy of
insurance maintained by Lessee, Lessee and/or such insurer, as the case may be,
shall be subrogated to the extent of such payment to the rights and remedies of
the Indemnified Person (other than under insurance policies maintained by such
Indemnified Person) on whose behalf such Claim was paid with respect to the
transaction or event giving rise to such Claim. So long as no Lease Event of
Default shall have occurred and be continuing, should an Indemnified Person
receive any refund, in whole or in part, with respect to any Claim paid by
Lessee hereunder, it shall promptly pay over the amount reflected (but not in
excess of the amount Lessee or any of its insurers has paid) to Lessee.
(g) EXPRESS NEGLIGENCE. THE INDEMNIFICATION OBLIGATIONS UNDER AND
THE PROVISIONS OF THIS SECTION 18.2 SHALL APPLY NOTWITHSTANDING THE SOLE, JOINT
OR CONCURRENT NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OF ANY INDEMNIFIED
PERSON.
SECTION 19. FURTHER ASSURANCES.
Lessee will duly execute and deliver to Lessor such further documents
and assurances and take such further action as Lessor may from time to time
reasonably request or as may be required by applicable law or regulation in
order to effectively carry out the intent and purpose of this Lease and to
preserve and maintain the rights and remedies created or intended to be created
in favor of Lessor hereunder, including, without limitation, the execution and
delivery of supplements or amendments hereto, subjecting to this Lease any
Replacement Unit and, if required to maintain title to the Units in Lessor, the
recording or filing of counterparts hereof or thereof in accordance with the
laws of any jurisdiction as Lessor may from time to time deem advisable, in each
case the cost thereof to be borne and paid by Lessee.
SECTION 20. LESSOR'S RIGHT TO PERFORM.
If a Lease Default or Lease Event of Default shall have occurred and be
continuing and Lessee fails to make any payment required to be made by it
hereunder or fails to perform or comply with any of its other agreements
contained herein, Lessor may itself make such payment or perform or comply with
such agreement, after giving not less than five days' prior notice thereof to
Lessee, but shall not be obligated hereunder to do so, and the amount of such
payment and of the reasonable expenses of Lessor incurred in connection with
such payment or the performance of or compliance with such agreement, as the
case may be, together with interest thereon at the Late Rate from such date of
payment, to the extent permitted by applicable law, shall be deemed to be
Supplemental Rent, payable by Lessee to Lessor on demand.
SECTION 21. ASSIGNMENT.
Section 21.1. ASSIGNMENT BY LESSOR. This Lease and/or the Rent and
other payments due to the Lessor thereunder may be assigned by such Lessor and,
if so assigned, the assignee shall have and be entitled to exercise specifically
assigned rights and specifically assigned powers of Lessor
-20-
hereunder, but the assignee shall not be chargeable with any obligations or
liabilities of Lessor hereunder or in respect hereof. Lessee will make all
claims concerning the Units to the manufacturer or supplier of such Units and
not with or against Lessor's assignee hereunder, and Lessor's assignee shall
have no liability or obligation arising out of any such claim and Lessee
covenants that it will not assert against any assignee of Lessor any defense,
counterclaim or offset on account of breach of warranty or otherwise including
in any action for payment of Rent or other amounts due hereunder or for
possession of the Units brought by any assignee of Lessor. Any payment of Rent
or other payment by Lessee to such assignee shall be in full satisfaction of
Lessee's obligation to make such payment under this Lease, but Lessee shall be
under no obligation to make any payment to any such assignee until Lessor shall
give Lessee written notice to make such payment to such assignee. In the event
of any assignment or grant of a security interest by Lessor, promptly following
request Lessee shall execute and deliver to Lessor an Acknowledgment Agreement
substantially in the form of Exhibit C.
Section 21.2. ASSIGNMENT BY LESSEE. LESSEE WILL NOT, WITHOUT THE PRIOR
WRITTEN CONSENT OF LESSOR (WHICH CONSENT MAY BE WITHHELD BY LESSOR IN ITS SOLE
DISCRETION), ASSIGN ANY OF ITS RIGHTS OR OBLIGATIONS HEREUNDER. UNLESS EXPRESSLY
AGREED IN WRITING BY LESSOR, NO SUCH ASSIGNMENT CONSENTED TO BY LESSEE SHALL
RELIEVE LESSEE OF ITS OBLIGATIONS HEREUNDER; RATHER, LESSEE SHALL BE JOINTLY AND
SEVERALLY LIABLE WITH SUCH ASSIGNEE FOR THE OBLIGATIONS OF THE "LESSEE" UNDER
THIS LEASE.
Section 21.3. SUBLESSEE'S PERFORMANCE AND RIGHTS. Any obligation
imposed on Lessee in this Lease shall require only that Lessee perform or cause
to be performed such obligation, even if stated herein as a direct obligation,
and the performance of any such obligation by any permitted assignee or
sublessee under an assignment or sublease then in effect and permitted by the
terms of this Lease shall constitute performance by Lessee and discharge of such
obligation by Lessee.
SECTION 22. NET LEASE, ETC.
This Lease is a net lease and Lessee's obligation to pay all Rent
payable pursuant to the terms and provisions hereof shall be absolute,
unconditional and irrevocable and shall not be affected by any circumstance of
any character including, without limitation, (a) any set-off, abatement,
counterclaim, suspension, recoupment, reduction, rescission, defense or other
right that Lessee may have against Lessor, any Affiliate of Lessor, any vendor
or manufacturer of any Unit, or any other Person for any reason whatsoever, (b)
any defect in or failure of title, merchantability, condition, design,
compliance with specifications, operation or fitness for use of all or any part
of any Unit, (c) any damage to, or removal, abandonment, requisition, taking,
condemnation, loss, theft or destruction of all or any part of any Unit or any
interference, interruption, restriction, curtailment or cessation in the use or
possession of any Unit by Lessee or any other Person for any reason whatsoever
or of whatever duration, (d) any insolvency, bankruptcy, reorganization or
similar proceeding by or against Lessee, Lessor or any other Person, (e) the
invalidity, illegality or
-21-
unenforceability of this Lease or any other instrument referred to herein or
therein or any other infirmity herein or therein or any lack of right, power or
authority of Lessee or Lessor, or any other Person to enter into this Lease or
to perform the obligations hereunder or thereunder or consummate the
transactions contemplated hereby or thereby or any doctrine of force majeure,
impossibility, frustration or failure of consideration, (f) the breach or
failure of any warranty or representation made in this Lease by Lessee or Lessor
or any other Person, (g) the requisitioning, seizure or other taking of title to
or use of such Unit by any government or Governmental Authority or otherwise,
whether or not by reason of any act or omission of Lessor or Lessee, or any
other deprivation or limitation of use of such Unit in any respect or for any
length of time, whether or not resulting from accident and whether or not
without fault on the part of Lessee, (h) any other circumstance or happening
whatsoever, whether or not similar to any of the foregoing, any present or
future law to the contrary notwithstanding to the extent permitted by applicable
law; provided, nothing contained in this Section 22 shall prevent Lessee from
bringing an action for damages suffered by Lessee as a result of the breach by
any Person of any obligation owed by it to Lessee or for equitable relief to
obtain compliance with such obligation. To the extent permitted by applicable
law, Lessee hereby waives any and all rights which it may now have or which at
any time hereafter may be conferred upon it, by statute or otherwise, to
terminate, cancel, quit or surrender this Lease with respect to any Unit, except
in accordance with the express terms hereof. Each payment of Rent made by Lessee
hereunder shall be final and Lessee shall not seek or have any right to recover
all or any part of such payment from Lessor or any Person for any reason
whatsoever except as expressly provided herein. Nothing contained herein shall
be construed to alter Lessee's obligations (and the limitations thereon) with
respect to Taxes, indemnification for which is provided in Section 18 or to
waive any claim which Lessee might have under this Lease or otherwise or to
limit the right of Lessee to make any claim it might have against Lessor or any
other Person or to pursue such claim in such manner as Lessee shall deem
appropriate, except in the manners precluded by this Section 22.
SECTION 23. NOTICES.
Unless otherwise expressly specified or permitted by the terms hereof,
all communications and notices provided for herein shall be in writing or by
facsimile capable of creating a written record, and any such notice shall become
effective (a) upon personal delivery thereof, including, without limitation, by
overnight mail or courier service, (b) in the case of notice by United States
mail, certified or registered, postage prepaid, return receipt requested, upon
receipt thereof, or (c) in the case of notice by such facsimile, upon
confirmation of receipt thereof, provided such transmission is promptly further
confirmed in writing by either of the methods set forth in clause (a) or (b), in
each case addressed to Lessor or Lessee (as applicable) at its respective
address set forth below or such other address as such Person may from time to
time designate by written notice to the other Person;
IF TO THE I/O ENTITIES:
----------------------
Input/Output, Inc.
00000 X. Xxxxxxx Xxxxxxxxx
Xxxxxxxx, Xxxxx 00000
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Attention: Xxx Xxxxxx
WITH A COPY TO:
--------------
D. Xxxxxxx Xxxx, Jr.
Xxxxxx & Xxxxxx L.L.P.
0000 Xxxxxx Xxxxxx
0000 Xxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxx 00000-0000
IF TO THE GEOKINETICS ENTITIES:
------------------------------
Geokinetics Inc.
Marathon Oil Tower
0000 Xxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: Chief Financial Officer
WITH A COPY TO:
--------------
Chamberlain, Hrdlicka, White, Xxxxxxxx & Xxxxxx
1400 Two Xxxxx Center
0000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxx 00000-0000
Attention: Xxxxx X. Spring, III
SECTION 24. PURCHASE OPTIONS.
SECTION 24.1. ELECTION TO RETAIN OR RETURN EQUIPMENT AT END OF BASIC OR
TERM. Not less than 90 days prior to the end of the Basic Term, Lessee shall
give Lessor irrevocable written notice of its decision to return or retain all
of the Units at the end of the Basic Term. If Lessee fails to timely give the
notice required by this Section 24.1, Lessee shall be deemed to have irrevocably
elected to return all of the Units at the end of the Basic Term. Any notice
given by Lessee pursuant to this Section 24.1 shall be irrevocable.
SECTION 24.2. PURCHASE OPTION. Provided that no Lease Default or Lease
Event of Default shall have occurred and be continuing either at the time of
notice pursuant to Section 24.1 or the expiration of the Basic Term (unless
Lessor shall have waived such Lease Event of Default or Lease Default solely for
the purpose of this Section 24.2) and Lessee shall have duly given the notice
required by Section 24.1, Lessee shall have the right and, upon the timely
giving of such notice or the failure to timely give such notice under Section
24.1, the obligation to purchase all of the Units at the expiration of the Basic
Term at a price equal to the Fair Market Sales Value of the Units as of the
Basic Term Expiration Date. Payment of the purchase price, together with all
other amounts due and owing by Lessee under this Lease, shall be made at the
place of payment specified in
-23-
Section 6.4 in immediately available funds against delivery of a xxxx of sale
transferring and assigning to Lessee all right, title and interest of Lessor in
and to such Units on an "as-is, where-is, with all faults" basis and without
recourse or warranty except against Lessor Liens. Lessor shall deliver such
other documents or releases as Lessee reasonably requests. Lessor shall not be
required to make any other representation or warranty as to the condition of
such Units or any other matters, and may specifically disclaim any such
representations or warranties.
SECTION 25. MISCELLANEOUS.
SECTION 25.1. MERGER COVENANT. Lessee shall not consolidate with or
merge into any other Person, or permit any other Person to merge into it, or
convey, transfer or lease substantially all of its assets as an entirety to any
Person unless (i) the Person formed by such consolidation or surviving such
merger (if other than Lessee) or the Person that acquires by conveyance,
transfer or lease substantially all of the assets of Lessee, as an entirety (the
"SUCCESSOR ENTITY"), shall execute and deliver to Lessor an agreement containing
the assumption by such Successor Entity of the due and punctual performance and
observance of each covenant and condition of this Lease to be performed or
observed by Lessee, (ii) immediately prior to and immediately after giving
effect to such transaction, no Lease Default or Lease Event of Default shall
have occurred, whether as a result of such consolidation or merger or such
conveyance, transfer or lease or otherwise, (iii) Lessee shall have made all
filings necessary or appropriate in the reasonable opinion of Lessor in order to
preserve and protect the rights of Lessor under this Lease, (iv) the financial
condition of the Successor Entity immediately after the consummation of such
consolidation, merger or other transaction is equal to or greater than the
financial condition of Lessee immediately prior thereto, and (v) there shall
have been delivered to Lessor an Officer's Certificate of the Successor Entity,
and an opinion of counsel (which may be such Persons' in-house counsel) in form
and substance reasonably satisfactory to Lessor, each stating that such
consolidation, merger or other transaction mentioned in clause (i) above comply
with this Section 25.1 (except that such opinion of counsel shall not be
required to address clause (iv) above). Upon consummation of such consolidation,
merger or other transaction, the Successor Entity shall succeed to, and be
substituted for, and may exercise every right and power of, Lessee under this
Lease with the same effect as if such Successor Entity had been named as Lessee
herein.
SECTION 25.2. NO IMPAIRMENT OF WARRANTIES. From and after the Closing
Date and throughout the Basic Term, Lessee shall not take any action (or fail to
take any action) if the result of such action (or failure to act) would abrogate
or invalidate or otherwise materially adversely affect the validity of any
warranties applicable to the Units that would otherwise be available with
respect to the Units.
SECTION 25.3. GOVERNING LAW, SEVERABILITY. This Lease and any
extensions, amendments, modifications, renewals or supplements hereto or thereto
shall be governed by and construed in accordance with the internal laws and
decisions of the State of Texas. Whenever possible, each provision of the Lease
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of any such lease shall be prohibited by or
invalid under the laws of any jurisdiction, such provision, as to such
jurisdiction, shall be ineffective to the extent of
-24-
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of such lease in any other jurisdiction.
SECTION 25.4. EXECUTION IN COUNTERPARTS. This Lease may be executed
in any number of counterparts, each executed counterpart constituting an
original and in each case such counterparts shall constitute but one and the
same instrument; provided, no security interest in this Lease may be created
through the transfer or possession of any counterpart thereof other than the
manually executed counterpart marked "Counterpart No. 1 of " on the
signature page thereof, which counterpart shall constitute the only
"original" hereof for purposes of the Uniform Commercial Code.
SECTION 25.5. HEADINGS AND TABLE OF CONTENTS, SECTION REFERENCES. The
headings of the sections of this Lease and the Table of Contents are inserted
for purposes of convenience only and shall not be construed to affect the
meaning or construction of any of the provisions hereof.
SECTION 25.6. SUCCESSORS AND ASSIGNS. This Lease shall be binding upon
and shall inure to the benefit of, and shall be enforceable by, the parties
hereto and thereto and their respective permitted successors and assigns.
SECTION 25.7. TRUE LEASE. It is the intent of the parties to this Lease
hereunder that it will be a true lease and not a "conditional sale," and that
Lessor shall at all times be considered to be Lessor or owner (as applicable) of
each Unit which is the subject of such lease for all purposes, and that such
lease conveys to Lessee no right, title or interest in any Unit except as
lessee. Both parties agree that for all purposes, including financial and tax
purposes, this Lease will be reported and treated as an operating lease and not
a financing lease. To protect Lessor and its successors and assigns in the event
any court or other third party determines that this Lease is a financing
arrangement, Lessee hereby grants to Lessor a security interest in and lien upon
all of the Units covered by such lease and all replacements and substitutions
therefor (including, without limitation, Replacement Units) accessories,
attachments, modifications and accessions are now hereafter affixed thereto or
incorporated therein and proceeds (cash and non-cash), insurance proceeds and
any all chattel paper, accounts, contract rights and general intangibles arising
from the sale, lease or other disposition of such Units. Upon request by Lessor,
Lessee agrees to execute such financing statements and fixture filings as are
necessary to perfect the aforesaid security interest in each relevant
jurisdiction, in each case at Lessee's cost.
SECTION 25.8. AMENDMENTS AND WAIVERS. No term, covenant, agreement or
condition of this Lease may be terminated, amended or compliance therewith
waived (either generally or in a particular instance, retroactively or
prospectively) except by an instrument or instruments in writing executed by
each party hereto and thereto.
SECTION 25.9. SURVIVAL. All warranties, representations, indemnities
and covenants made by either party hereto, herein or in any certificate or other
instrument delivered by such party or on the behalf of any such party under this
Lease, shall be considered to have been relied upon by the other party hereto
and shall survive the consummation of the transactions contemplated hereby on
the
-25-
Closing Date regardless of any investigation made by either such party or on
behalf of either such party, and to the extent having accrued and not been paid
or relating to or otherwise arising in connection with the transactions
contemplated by this Lease, shall survive the expiration or other termination of
this Lease.
SECTION 25.10. BUSINESS DAYS. If any payment is to be made hereunder or
any action is to be taken hereunder on any date that is not a Business Day, such
payment or action otherwise required to be made or taken on such date shall be
made or taken on the immediately succeeding Business Day with the same force and
effect as if made or taken on such scheduled date and as to any payment
(provided any such payment is made on such succeeding Business Day) no interest
shall accrue on the amount of such payment from and after such scheduled date to
the time of such payment on such next succeeding Business Day.
SECTION 25.11. UCC ORIGINAL. To the extent that this Lease constitutes
chattel paper (as such term is defined in the Uniform Commercial Code), no
security interest in this Lease may be created through the transfer or
possession of any counterpart hereof, other than the manually executed
counterpart hereof marked "Counterpart No. 1 of 2," which counterpart shall
constitute the only "original" hereof for purposes of the Uniform Commercial
Code.
SECTION 25.12. WAIVER OF TRIAL BY JURY. EACH PARTY TO THIS LEASE AND
THIS LEASE WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED
UPON, OR RELATED TO, THE SUBJECT MATTER OF THIS LEASE. THIS WAIVER IS KNOWINGLY,
INTENTIONALLY, AND VOLUNTARILY MADE BY EACH PARTY AND EACH PARTY ACKNOWLEDGES
THAT NEITHER THE OTHER PARTY NOR ANY PERSON ACTING ON BEHALF OF THE OTHER PARTY
HAS MADE ANY REPRESENTATIONS OF FACT TO INDUCE THIS WAIVER OF TRAIL BY JURY OR
IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. EACH PARTY FURTHER ACKNOWLEDGES THAT
IT HAS BEEN REPRESENTED (OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE
SIGNING OF THIS LEASE AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL
COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO
DISCUSS THIS WAIVER WITH COUNSEL. EACH PARTY FURTHER ACKNOWLEDGES THAT IT HAS
READ AND UNDERSTANDS THE MEANING AND RAMIFICATIONS OF THIS WAIVER PROVISION.
SECTION 25.13. WAIVERS. NO WAIVER OF ANY PROVISION OF THIS LEASE SHALL
BE DEEMED TO BE A CONTINUING WAIVER OF SUCH PROVISION IN THE EVENT THE SAME OR
SIMILAR CONDITIONS GIVING RISE TO SUCH WAIVER THEREAFTER OCCUR.
[signatures on the following page]
-26-
-27-
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease to be duly
executed and delivered on the day and year first above written.
LESSOR:
INPUT/OUTPUT, INC.
By: /s/ Xxx X. Xxxxxx
----------------------------------------
Name: Xxx X. Xxxxxx
--------------------------------------
Title: V-P Land Division
-------------------------------------
LESSEE:
GEOKINETICS INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
----------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
--------------------------------------
Title: Vice President
-------------------------------------
-28-
Appendix A
Lease Agreement
DEFINITIONS
GENERAL PROVISIONS
The following terms shall have the following meanings for all purposes
of the Lease to which this Appendix A is attached, unless the context thereof
shall otherwise require, and such meanings shall be equally applicable to both
the singular and the plural forms of the terms herein defined. In the case of
any conflict between the provisions of this Appendix A and the provisions of the
main body of the Lease, the provisions of the main body of the Lease shall
control the construction of such Lease.
Unless the context otherwise requires, (i) references to agreements
shall be deemed to mean and include such agreements as the same may be amended,
supplemented and otherwise modified from time to time, and (ii) references to
parties to agreements shall be deemed to include the permitted successors and
assigns of such parties.
DEFINED TERMS
"AFFILIATE" of any Person shall mean any other Person which directly or
indirectly controls, or is controlled by, or is under a common control with,
such Person. The term "CONTROL" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise, and the terms "CONTROLLING" and "CONTROLLED" shall have meanings
correlative to the foregoing.
"AFTER-TAX BASIS" shall mean, with respect to any payment received or
accrued by any Person, that the amount of such payment is supplemented by a
further payment or payments so that the sum of all such payments, after
reduction for all Taxes payable by such Person imposed by any taxing authority
(taking into account any reduction in available net operating loss), shall be
equal to the payment due to such Person.
"APPLICABLE LAW" means (i) when used other than with respect to a Unit
or Units, all then existing applicable laws, rules, regulations (including
Environmental Laws), statutes, treaties, codes, ordinances, permits,
certificates, orders and licenses of and interpretations by, any Governmental
Authority and all then existing applicable judgments, decrees, injunctions,
writs, orders or like action of any court, arbitrator or other administrative,
judicial or quasi judicial tribunal or agency of competent jurisdiction
(including those pertaining to health, safety or the environment and those
pertaining to the use of the Units and (ii) when used with respect to a Unit or
Units, all then existing laws, rules, regulations (including Environmental
Laws), statutes, treaties, codes, ordinances, permits, certificates, orders and
licenses of any interpretations by, any Governmental Authority
Appendix A
Page 1
applicable to such Unit or Units in the applicable jurisdiction and all then
existing judgments, decrees, injunctions, writs, orders or like action of any
court, arbitrator or other administrative, judicial or quasi judicial tribunal
or agency of competent jurisdiction (including those pertaining to health,
safety or the environment and those pertaining to the use of such Unit or Units)
applicable to such Unit or Units in the applicable jurisdiction.
"BANKRUPTCY CODE" shall mean the United States Bankruptcy Reform Act
of 1978, as amended from time to time, 11 U.S.C. Section 101 et. seq.
"BASIC RENT" shall have the meaning specified in Section 6.2 of this
Lease.
"BASIC TERM" shall mean 36 calendar months commencing as of the Basic
Term Commencement Date.
"BASIC TERM COMMENCEMENT DATE" shall mean the date of the Lease as
reflected in the preamble paragraph on page 1 of the Lease.
"BASIC TERM EXPIRATION DATE" shall mean the same calendar day as the
Basic Term Commencement Date, 36 months hence, or the first business day
thereafter if a holiday.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a
day on which commercial banking institutions are authorized or required by law,
regulation or executive order to be closed in Texas.
"CHANGE OF CONTROL" shall mean when any Person or two or more Persons
(other than holders of the Lessee's 12.0% Senior Subordinated Notes due 2005)
acting in concert, acquires beneficial ownership (within the meaning of Rule
13d3 of the Securities Exchange Act of 1934, as amended), directly or
indirectly, of securities of Lessee (or other securities convertible into such
securities) representing forty percent (40%) or more of the combined voting
power of all outstanding securities of the Lessee entitled to vote in the
election of directors.
"CLAIMS" shall have the meaning specified in Section 18.2(a) of the
Lease.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time, or any successor law.
"ENVIRONMENTAL LAW" means any and all federal, state, local and foreign
laws, statutes, ordinances, orders, codes, rules, regulations, policies,
guidance documents, judgments, decrees, injunctions or agreements with any
Governmental Authority, relating to the protection of health or the air, surface
water, groundwater, land (including land surface or subsurface), fish, wildlife,
biota and any other natural resources and/or governing the handling, use,
generation, treatment, storage, transportation, disposal, manufacture,
distribution, formulation, packaging, labeling or Release or Hazardous
Substances, whether now existing or subsequently amended or enacted, and any
common
Appendix A
Page 2
law doctrine, including but not limited to, negligence, nuisance,
trespass, personal injury or property damage related to or arising out of the
presence, Release or exposure to a Hazardous Substance.
"EQUIPMENT" shall mean the equipment and other properties described in
this Lease, together with any and all accessions, additions, improvements and
replacements from time to time incorporated or installed in any item thereof
which are the property of Lessor pursuant to the terms of this Lease.
"EVENT OF LOSS" shall have the meaning specified in Section 13.1 of
this Lease.
"FAIR MARKET RENTAL VALUE" or "FAIR MARKET SALES VALUE" with respect to
any Unit of Equipment shall mean the cash rent or cash price, respectively,
obtainable for such Unit in an arm's length lease or sale, respectively, between
an informed and willing lessee or purchaser, respectively, under no compulsion
to lease or purchase, as the case may be, and an informed and willing lessor or
seller, under no compulsion to lease or sell, as the case may be, as the same
shall be specified by agreement between Lessor and Lessee. If the parties are
unable to agree upon a Fair Market Rental Value and/or a Fair Market Sales Value
within 30 days after delivery of notice by Lessee pursuant to Section 17.1(e) of
the Lease, or otherwise where such determination is required, within a
reasonable period of time, such value shall be determined by appraisal. Lessee
will within 15 days after such 30-day period provide Lessor the name of an
appraiser that would be satisfactory to Lessee, and Lessor and Lessee will
consult with the intent of selecting a mutually acceptable appraiser. If a
mutually acceptable appraiser is selected, the Fair Market Rental Value or the
Fair Market Sales Value, as the case may be, shall be determined by such
appraiser and Lessee shall bear the cost thereof. If Lessee and Lessor are
unable to agree upon a single appraiser within such 15-day period, two
independent qualified appraisers, one chosen by the Lessee and one chosen by the
Lessor, shall jointly determine such value, and Lessor shall bear the cost of
the appraiser selected by Lessor and Lessee shall bear the cost of the appraiser
selected by Lessee. If such appraisers cannot agree on the amount of such value
within 15 days of appointment, one independent qualified appraiser shall be
chosen by the American Arbitration Association. All three appraisers shall make
a determination within a period of 15 days following appointment, and shall
promptly communicate such determination in writing to the Lessor and Lessee. If
there shall be a panel of three appraisers, the appraisal furthest from the
average shall be eliminated, the remaining two appraisals shall be averaged and
such resulting average shall be the Fair Market Rental Value or Fair Market
Sales Value, as the case may be. The determination made shall be conclusively
binding on both the Lessor and Lessee. If there shall be a panel of three
appraisers, Lessee and Lessor shall equally share the cost of the third
appraiser. If such appraisal is in connection with the exercise of remedies set
forth in Section 17 of the Lease, Lessee shall pay the costs of such appraisal.
In determining Fair Market Rental Value or Fair Market Sales Value by appraisal
or otherwise, it will be assumed that the relevant Unit is in the condition and
location in which it is required to be returned to Lessor pursuant to Section 9
of the Lease and unencumbered by a Lease, any sublease or any Liens, except that
with respect to Section 17 of this Lease or as otherwise specifically provided
therein, a determination of Fair Market Rental Value or Fair Market Sales Value
shall be based on "as is, where is" condition.
Appendix A
Page 3
"GOVERNMENTAL AUTHORITY" shall mean any federal, state, county,
municipal, foreign or other governmental or regulatory authority, agency, board,
body, commission, instrumentality, court or quasi Governmental Authority.
"HAZARDOUS SUBSTANCES" shall mean any hazardous or toxic substances,
materials or wastes, including, but not limited to, those substances, materials,
and wastes listed in the United States Department of Transportation Hazardous
Materials Table (49 CFR 172.10 l) or by the Environmental Protection Agency as
hazardous substances (40 CFR part 302) and amendments thereto, or such
substances, materials and wastes which are or become regulated under any
applicable local, state or federal law or the equivalent under applicable
foreign laws including, without limitation, any materials, waste or substance
which is (a) petroleum, (b) asbestos, (c) polychlorinated biphenyls, (d) defined
as a "hazardous material," "hazardous substance" or "hazardous waste" under
applicable local, state or federal law or the equivalent under applicable
foreign laws, (e) designated as a "hazardous substance" pursuant to Section 311
of the Clean Water Act, (f) defined as "hazardous waste" pursuant to Section
1004 of the Resource Conservation and Recovery Act, or (g) defined as "hazardous
substances" pursuant to Section 101 of the Comprehensive Environmental Response,
Compensation, and Liability Act.
"INDEMNIFIED PERSON" shall have the meaning specified in Section
18.2(b) of this Lease.
"LATE RATE" shall mean, with respect to any Rent or other payment not
paid on the date when due, the lesser of (x) 18% per annum and (y) the maximum
interest rate from time to time permitted by law.
"LEASE" shall mean this Lease Agreement, as amended and supplemented
from time to time.
"LEASE DEFAULT" shall mean an event or occurrence that upon the giving
of notice or lapse of time or both would constitute a Lease Event of Default.
"LEASE EVENT OF DEFAULT" shall mean a Lease Event of Default under the
applicable Lease as specified in Section 16 of this Lease.
"LESSOR LIENS" means any Lien affecting, on or in respect of any Unit,
arising as a result of (i) claims against Lessor, not related to the
transactions contemplated by the Lease, or (ii) acts or omissions of Lessor not
related to the transactions contemplated by the Lease or in breach of any
covenant or agreement of Lessor set forth in the Lease, or (iii) taxes imposed
against Lessor or the Unit which are not indemnified against by Lessee pursuant
to this Lease.
"LIEN" shall mean any mortgage, pledge, security interest, lien,
encumbrance, lease, disposition of title or other charge of any kind on
property.
"MODIFICATION" shall have the meaning set forth in Section 12.2 of this
Lease.
Appendix A
Page 4
"NET INCOME" shall have its commonly used meaning under U. S. Generally
Accepted Accounting Principles ("GAAP").
"NON-SEVERABLE MODIFICATION" shall mean any Modification that is not
readily removable without impairing the current and residual value, utility or
remaining useful life of the Unit immediately prior to removal of such
modification, other than in a DE MINIMIS nature.
"PERMITTED CONTEST" means actions taken by a Person to contest in good
faith and by appropriate proceedings diligently conducted, the legality,
validity or applicability to any Unit of any Applicable Law; provided, such
contest could not reasonably be expected to (i) interfere (other than in a de
minimis respect) with the use, possession, operation or return of any Unit or
(ii) create a material risk of sale, forfeiture, loss, or loss of or
interference with use or possession of any Unit or interference with the payment
of Rent or (iii) expose Lessor to criminal sanctions or (iv) relieve Lessee of
the obligation to return the Unit in compliance with the provisions of this
Lease.
"PERMITTED LIENS" with respect to each Unit shall mean (i) any Liens
thereon for taxes, assessments, levies, fees and other governmental and similar
charges not delinquent or the amount or validity of which is being contested in
good faith by appropriate proceedings so long as there exists no material risk
of sale, forfeiture, loss, or loss of or interference with use or possession of
any Unit or interference with the payment of rent; and (ii) any Liens incurred
or arising in the ordinary course of Lessee's (or if a permitted sublease is
then in effect, sublessee's) business securing of mechanics, suppliers,
materialmen, laborers, employees, repairment and other like Liens which are not
delinquent or the amount or validity of which is being contested in good faith
by appropriate proceedings so long as there exists no material risk of sale,
forfeiture, loss, or loss of or interference with use or possession of any Unit
or interference with the payment of Rent.
"PERSON" shall mean an individual, partnership, corporation, trust,
association or unincorporated organization, and a government or agency or
political subdivision thereof.
"RELEASE" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, dumping or disposing of a Hazardous
Material into the air, surface water, groundwater, land (including land surface
or subsurface), fish, wildlife, biota or any other natural resources.
"RENT" shall mean all Basic Rent and Supplemental Rent.
"RENT PAYMENT DATE" or "PAYMENT DATE" shall mean each monthly payment
date of each year occurring during the Basic Term as specified in Section 6 of
this Lease; provided, if any such date shall not be a Business Day, then "RENT
PAYMENT DATE" or "PAYMENT DATE" shall mean the next succeeding Business Day.
"REPLACEMENT UNIT" shall mean any Unit which shall have been
substituted for another such Unit of the same type and leased under this Lease.
Appendix A
Page 5
"REQUIRED MODIFICATION" shall have the meaning set forth in Section
12.1 of this Lease.
"SEVERABLE MODIFICATION" shall mean any Modification that is readily
removable without causing material damage to any Unit and without diminishing
the current or expected residual value, utility or useful life of such Unit
below the current and residual value, utility or useful life of such Unit
immediately prior to such Modification, assuming that such Unit was then in the
condition required to be maintained by the terms of this Lease, other than in a
DE MINIMIS nature.
"SUBSIDIARY" of any Person shall mean any corporation, association, or
other business entity of which more than 50% (by number of votes) of the voting
stock at the time outstanding shall at the time be owned, directly or
indirectly, by such Person or by any other corporation, association or trust
which is itself a Subsidiary within the meaning of this definition, or
collectively by such Person and any one or more such Subsidiaries.
"SUCCESSOR ENTITY" shall have the meaning set forth in Section 25.1 of
this Lease.
"SUPPLEMENTAL RENT" shall mean all amounts, liabilities and obligations
(other than Basic Rent) which Lessee assumes or agrees to pay under this Lease
to or on behalf of any of the other parties thereto.
"TAXES" means any and all new or existing governmental or
quasi-governmental taxes, assessments, levies, assessments, imposts, duties,
fees, charges and withholdings of any kind or nature whatsoever and howsoever
described, including, income, gross receipts, franchise, sales, use, property,
excise, profits, capital, Btu or energy, gathering, transport, pipeline,
utility, employment, stamp, transfer, interest equalization mortgage,
intangible, license, filing, recording and activity fees or charges together
with any and all penalties, fines, additions or interest thereon.
"UNIT" shall mean a unit or item of Equipment.
Appendix A
Page 6
Schedule 14.1 to Lease Agreement
(Insurance)
At all times during the term of each Lease and until the Units are returned to
Lessor in accordance with Section 9.1, Lessee shall at its cost and expense,
maintain or cause to be maintained valid and enforceable insurance of the
following character:
(i) "all risks" property insurance covering the Units and all
replacements and additions thereto, and all other property
which constitute part of the Units in a manner consistent with
insurance maintained by prudent owners or operators of assets
similar to the Units and in any event in amounts not less than
the greater of (a) the actual replacement cost of the Units
and (b) the Retirement Amount applicable to the Units.
(ii) public liability insurance covering legal liability against
claims for bodily injury, death or property damage, occurring
on, in or about the facilities at which the Units are located
and the adjoining land, streets, sidewalks or ways or
occurring as a result of construction and use and operation of
such facilities or as a result of materials manufactured,
processed, constructed or sold, or services rendered from such
facilities or the Units in the minimum amount of $1,000,000
and with umbrella excess liability coverage in the amount of
$5,000,000. Coverage shall include "premises/operations",
"independent contractors", and blanket contractual"
liabilities.
(iii) insurance during the course of any construction or repair or
modification of any Units against "all risks", including
collapse and transit coverage, covering the total value of
work performed and equipment, supplies and materials
furnished, in an amount equal to the greater of (a) the actual
replacement cost of such Units and (b) the Retirement Amount
applicable to the Units.
(iv) worker's compensation insurance (or other similar insurance or
self-insurance program permitted and in compliance with
Applicable Laws) covering all Persons employed in connection
with any work done on or about or with the Units with respect
to which claims for death or bodily injury could be asserted
against Lessor.
(v) such other insurance, in such amounts, against such risks, and
with such other provisions as is customarily and generally
maintained by operators of similar properties of a financial
standing similar to Lessee, including war risk insurance (at
and during such times and at such locations as war risk
insurance is commonly obtained in the case of property similar
to the Units), when and to the extent obtainable;
Schedule 14.1
Page 1
Lessee may self insure up to the amount of $100,000 with respect to such risks
described in clauses (i), (ii) and (iii) above.
Such insurance shall be written by reputable insurance companies of recognized
financial standing and which are legally qualified to issue such insurance and
shall name Lessee as insured and Lessor as additional insured with respect to
insurance described in clause (ii) and, to the extent applicable, clause (v)
above, and shall name Lessor as loss payee, for distribution to itself and
Lessee, as their interests may appear, with respect to insurance described in
clauses (i), (iii) and, to the extent applicable, clause (v) above. Lessee shall
obtain such insurance policies from insurance companies with a General Policy
Rating of A:X or better in Best's Key Rating Guide. Such insurance may be
obtained by Lessee by endorsement on its blanket insurance policies, provided
that the Units shall be separately scheduled so that no loss at any other
property shall reduce the amount payable with respect to the Units. All
liability policies shall be provided on an occurrence policy language form with
no punitive damage exclusion and with an unlimited claim discovery period. Each
policy shall contain a waiver of subrogation against the Indemnified Persons.
Lessee shall be responsible for any obligation incurred as a result of any
self-retention or deductible application.
Schedule 14.1
Page 2
Exhibit A
CERTIFICATE OF ACCEPTANCE
Re: Lease Agreement dated October , 1999, executed by Input/Output,
Inc. and Geokinetics Inc. (the "Lease").
The undersigned, an authorized officer of Geokinetics Inc., Lessee, certifies
that each Unit of Equipment described on Schedule 2 of the Lease has been
accepted by Geokinetics Inc. for all purposes.
Any capitalized term used but not defined herein shall have the meaning ascribed
to such term in the above referenced Lease Agreement.
EXECUTED as of .
------------------------
GEOKINETICS INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
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Exhibit A
Page 1
Exhibit B
ACKNOWLEDGMENT AGREEMENT
Re: Lease Agreement dated September , 1999 (the "Lease") between
Input/Output, Inc., as Lessor and Geokinetics Inc., as Lessee.
Lessor hereby gives notice to Lessee that the Lease will be assigned by
Lessor to the party identified below (the "Assignee"). Until otherwise
instructed in writing, Lessee is hereby instructed to make all payments of Rent
under the Lease to:
-------------------------------
-------------------------------
-------------------------------
As a material inducement to Assignee to consummate the assignment
referenced above, Lessee hereby acknowledges and agrees that:
(i) the Lease is in full force and effect and Lessee is not in
default thereunder;
(ii) Lessee's obligation to make all Rent Payments as set
forth in the Lease is unconditional and it will make all of said
payments, without any right of setoff, defense or counterclaims, as
provided in Section 6 of the Lease;
(iii) Assignee shall enjoy all of Lessor's right and
privileges under the Lease but shall not be chargeable with any
obligations or liabilities under the Lease except to the extent
expressly assumed in writing by Assignee; and
(iv) any notice which Lessee is required to give Lessor under
the Lease shall be sent to Assignee.
This Acknowledgment Agreement may be executed in counterparts.
The parties have executed this Acknowledgment Agreement as of this
day of , .
------- ---------------- ------
LESSEE: LESSOR:
GEOKINETICS INC. INPUT/OUTPUT, INC.
By: By:
------------------------------- --------------------------------
Name: Name:
----------------------------- ------------------------------
Title: Title:
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Exhibit A
Page 2